There are tax consequences for the people who perform these jobs. Basically, if you receive income from an online platform offering goods and services, it’s generally taxable. That’s true even if the income comes from a side job and even if you don’t receive an income statement reporting the amount of money you made.
Traits of Gig Workers
Gig workers are those who are independent contractors and conduct their jobs through online platforms. Examples include Uber, Lyft, Airbnb, Angi, Instacart, and DoorDash.
Unlike traditional employees, independent contractors don’t receive benefits associated with employment or employer-sponsored health insurance. They also aren’t covered by the minimum wage or other protections of federal laws, aren’t part of states’ unemployment insurance systems, and are on their own when it comes to training, retirement savings, and taxes.
If you’re part of the gig or sharing economy, here are some considerations.
- You may need to make quarterly estimated tax payments because your income isn’t subject to withholding. These payments are generally due on April 15th, June 15th, September 15th, and January 15th of the following year. (If a deadline falls on a Saturday or Sunday, the deadline is extended to the next business day.)
- You should receive a Form 1099-NEC, Nonemployee Compensation, a Form 1099-K, or other income statement from the online platform.
- Some or all of your business expenses may be deductible on your tax return, subject to the normal tax limitations and rules. For example, if you provide rides with your own car, you may be able to deduct depreciation for wear and tear and deterioration of the vehicle. Be aware that if you rent a room in your main home or vacation home, the rules for deducting expenses can be complex.
It’s critical to keep good records tracking income and expenses in case you are audited by the IRS or a state/local tax authority. Please contact us if you have questions about your tax obligations as a gig worker or the deductions you can claim. You don’t want to get an expensive surprise when you file your tax return next year.